Retail Rebirth

The industry watched Federated Department Stores gobble up May Co., and Kmart and Sears, as they merged. Then Neiman Marcus was sold to private equity owners in a trend that shows no signs of slowing.

As these and other changes continue shaping an evolving industry that rings up trillions of dollars in sales, older shopping malls and centers are laser-focused on survival. And because developers conceived fewer malls in the past five years, time-starved shoppers seeking convenience have given rise to the popularity of open-air lifestyle centers.

So what do aging malls do to compete? They redevelop.

Last year, a total of 45 malls and 138 shopping centers were entrenched in redevelopments, renovations or expansions, according to the ICSC and the National Research Bureau. Of the malls, the majority were built between 1950 and 1980.

Retail Traffic asked developers to tell us about major redevelopments opened last year, and selected four examples of projects that underwent major structural overhauls. Walls were ripped out and roofs were torn off. There was reconstruction and retrofitting.

It's a game of survival for these older centers. Here are their stories.

Tysons Corner Center

Tysons Corner Center, which opened in McLean, Va. in 1968, became a success early on with shoppers who lived in tony bedroom communities nearby.

Originally built by D.C.-based Lerner Enterprises, the center reinvented itself over and over. In the 1980s, another floor was added. Department stores came and went, including Woodward & Lothrop and JCPenney. Nordstrom opened one of its first East Coast stores at the property in 1989.

In its latest reincarnation, designed by RTKL, Tysons embarked on its largest overhaul in more than 15 years. Then California-based Macerich Properties acquired a 50 percent stake in Tysons through its purchase of Wilmorite Properties, a co-owner. Alaska Permanent Fund still owns half.

“We were in the throes of construction,” says Doug Healey, a Macerich senior vice president of leasing. “But it maintained itself. The fact that Macerich brought on everybody that was involved made this virtually seamless.”

The $130 million overhaul converted the old JCPenney and connected it to a new building and an AMC theater. In all, the mall added another 362,000 square feet of retail space, bringing restaurants including Brio Tuscan Grille, a Barnes & Noble bookstore and other storefronts to the property last fall.

Parking was also reconfigured to alleviate some of the traffic snarl. Mall sales reached $680 per square foot, according to Macerich.

“The redevelopment project at Tysons Corner has provided our customers an even more compelling shopping experience, which is great for everyone,” says Tim Tribby, Nordstrom store manager.

There's more. Space could more than double at Tysons Corner Center when a Metrorail transit station opens by the mall. Projected plans call for the transit link to extend from West Falls Church to Tysons by 2010 and a mixed-use center with 300,000 square feet of additional retail and an urban environment.

“People want to see Tysons become a pedestrian, transit oriented place,” says Paul Shaw, urban planning vice president with the Dallas office of RTKL.

To come: Space could more than double with a Metrorail transit station link. Plans call for an additional 3.25 million sq. ft. to include 2 million sq. ft. of office space, 600 apartments, a 120-room hotel and about 300,000 sq. ft. of additional retail.

Source: research and company information

The Galleria Mall

When architect Richard Gelber went looking for the Galleria Mall in Fort Lauderdale, Fla., he almost drove right by. “It didn't have any sense of identity,” Gelber recalls.

Originally called the Sunrise Shopping Center, the mall was conceived in the 1950s as an open-air, two-level shopping center.

The center boasted a grocery store and two department stores, says Gelber, a co-owner of SPG3, a Philadelphia architecture firm hired to do the renovations.

Despite a strange configuration — it was built over an above-ground parking deck — the mall thrived. That is, until competition arrived from several newer malls, including Aventura and Town Center at Boca Raton. Shoppers also defected to the downtown Fort Lauderdale strip, where outdoor restaurants and specialty retailers set up shop.

By 2001, sales were just below the national average of $345 per square foot, even though it was surrounded by a growing affluent customer base. Now, sales top $500 a foot.

“It had a public environment that felt dark,” Gelber says. “The lighting was dingy and the connections to the street were dated. Entry ways were not well marked. The exterior didn't say this was an exciting place to shop.”

Hired in 2002, SPG3 took on redesigning and renovating the ailing property with the vision of recapturing the traditional market and tourists. The idea: a resort theme that recalls the days of the grand old hotels of Florida, such as Hotel Broward The $50 million renovation involved literally ripping off parts of the roof, adding vaulted space, and cutting out the floors. Large windows were added to draw in more light to a new focal point dubbed Palm Court with restaurants and other entertainment at the mall.

Among the other changes: new escalators and light cream flooring with accents of black, gold and green marble.

Midway through renovations, however, Lord & Taylor closed. Then last year, just when phase I was completed, Hurricane Wilma hit and Macy's closed. It won't reopen until November. As for the empty Lord & Taylor, Linda DiZinno, mall general manager with Kravco Simon, says three scenarios are being considered.

Mount Vernon Plaza

Combine two derelict, underused shopping centers into one and what do you get? The Mount Vernon Plaza.

That's what Federal Realty Investment Trust did when it merged the adjacent Mount Vernon Plaza and South Valley Shopping Center into one big, up-to-date center near Alexandria, Va., in the heart of metropolitan D.C.

Because the run-down centers suffered from inadequate maintenance and numerous vacancies (a big Ames store had closed), consumers generally came to a specific store.

It was evident that both failed to meet the expectations of those living in nearby newly developed residential neighborhoods. A one-stop shopping destination was needed.

Through a successful redevelopment of the properties, Rockville, Md.-based Federal Realty transformed the two sites into a modern and attractive 550,000-square-foot shopping center and renamed the entire development Mount Vernon Properties.

The redesign allowed for three new anchors, a larger parking field and the creation of five additional retail pads.

The new buildings created a Main Street entryway, improving car and pedestrian circulation. In addition, the two centers underwent extensive façade and sidewalk renovations.

Today, Mount Vernon Plaza offers customers a wider variety of retail stores including newly minted PetSmart, Michaels and Bed Bath & Beyond, some of which are first timers to the community.

A Wachovia Bank branch replaces a Roy Rogers. An International House of Pancakes was demolished to make way for a pedestrian walkway with pads on either side.

Now, with the additional benefits of fresh landscaping, improved light fixtures and outdoor community areas, Federal figures it has the right type of center to draw from the impressive demographics in surrounding neighborhoods.

Within one mile, 20,655 residents have an average income of $64,157. Even better, within five miles, there are 94,610 with average household incomes of $92,645.

With this project, Federal Realty successfully applied its ability to take an underused property, envision its potential and turn it into a reality, giving two former derelict centers a second chance.

Derby Street Shoppes

The quaint New England seaside town of Hingham, Mass., was built to last. The Old Ship Meeting House constructed by European settlers in 1681, is still used as a church.

By contrast, Hingham Plaza, a vintage 1960s shopping center in this white-picket-fence community about 15 miles southeast of Boston had only a 40-year life span. By 2000, it badly needed a makeover.

Enter Newton, Mass.-based W/S Development Associates, which bought the dilapidated property and planned its rebirth.

The derelict 450,000-square-foot Hingham Plaza was anchored by a defunct Bradlee's, a Building 19 outlet store, Brooks Pharmacy and White's Pastry Shop. “There were a lot of vacancies,” says Brian Sciera, vice president of lifestyle centers for W/S Development.

The plan was to turn it into a 430,000-square-foot gem on 43 acres. “Developing one of these is like doing a 1,500-piece jigsaw puzzle and every morning someone comes in to mess up your puzzle,” says Sciera.

“We didn't plan it as a lifestyle center initially,” says Sciera. “We planned something of a hybrid, but it became clear to us it could be a lot more.”

The developer envisioned demolishing some existing buildings and connecting the old Bradlee's, now a Kohl's, to a two-level center with high-end specialty retailers and a Whole Foods grocery store at a cost of $70 million.

In a town where change comes slowly, if at all, the new plans for the renamed Derby Street Shoppes were not immediately embraced.

Traffic concerns topped the complaints. “Wherever you are in New England, you have the traffic issue to deal with,” Sciera says.

And townspeople expressed concern over how a bigger center would fit in. “Hingham is the quintessential bedroom community,” Sciera says. “People were concerned it would impact the character of their town.”

Other challenges arose. Kohl's acquired Bradlee's leases, including the one at Hingham Plaza so the developer couldn't just knock down the whole plaza. Instead, they had to design the new center while incorporating Kohl's. They tore down most everything else.

Once the community accepted the changes, W/S remade the center. The two sides of the property were connected by a pavilion building with a pedestrian connection.

Longtime tenant David White, owner of White's, is pleased with the results. He says sales have increased 35 percent to 40 percent. His only complaint: The rebirth means the days of cheap rent are over.